[noduerme]

I don't see how home prices can really fall enough to keep the cost of housing equal as interest rates rise. Because don't higher rates also disincentivize sellers and create more of a supply shortage as well, by taking more homes off the market, apart from disincentivizing new construction? I'm admittedly a little daft at economics but... e.g. I've got a fixed rate mortgage around 4%. Suppose I wanted to sell and I think we're at the top of the housing market... my options would be to buy something else now at the top of the market and pay a higher interest rate, or rent for a year until prices come down and probably still pay a higher rate.

Certainly, low mortgage rates drove home prices way up... but does that mean high rates could drive them down? I mean, maybe over a long period of time as existing mortgages get paid off (?) but for now while the vast majority of mortgages out there are lower than the going rate, won't that just keep constraining the supply and prevent the price of houses from dropping significantly?

[majormajor]

This is pretty close to the most common counter-argument I've seen to the "this is another 2000s housing bubble" claim - the bubble burst when people had to sell or got foreclosed on, people taking out the mortgages today, or purchasing in cash, appear to be in much better financial shape to weather things and not have to sell.

You'll still have sales - some people will die, some people will have to move for various reason, etc - but how much it will fall seems like a very hard to predict question.

[vinyl7]

Purchasing cash wasn't really straight handing over a fat stack to the seller. A lot of "all cash" purchases were people who got loans through non-traditional means. So instead of getting a regular mortgage, they got financing through an institution who offered cash to the seller but is still a loan to the buyer.

Something like this: https://www.homelight.com/cash-offer

[yucky]

A TON of investment properties were purchased over the last few years, so those may be sold as investors need to balance out the huge losses they took on stocks, crypto, etc.

With rising rates, the counter pressure on prices from buyers may not exist in large enough supply to prevent the investors selling from driving prices down.

[noduerme]

Just anecdotally, a friend who took an enormous shellacking in crypto told me the other day he's glad he'd bought two rental houses before getting into DeFi. He seems totally disinclined at this point to make any high risk moves with what remains of his savings. I suppose if he had to sell that would be another thing, but I don't think most even-marginally-sane people in that position are going to sell property and chase higher returns in the market.

[Schiendelman]

Rents aren’t dropping - so the investment properties are likely going to be better off held as inflation helps push down the cost of those mortgages vs rental income.